How the best restaurants achieve an 87% employee retention rate
The restaurant business is a lot like a duck: calm, smooth, and calculated above the surface, but churning, swirling, and working like hell beneath it. The business is demanding, stressful, and to make matters worse, sees some of the lowest wages in the country.
It’s not surprising then, that there’s an enormous employee turnover problem. Fortunately, owners and managers are tuning into it. Restaurants of all sizes (from less than 10 employees to more than 300 employees) are starting to track their turnover rates, confront the problem, and solve it with diverse, creative, and well-designed employee benefit programs focused on, among other things, higher pay and health care coverage.
You don’t have to be a large restaurant operation to keep your employees around. (That’s why Equal exists.)
There’s a problem in the restaurant industry
The restaurant industry turnover problem is extremely costly. The leisure and hospitality industry, which includes restaurants, sees a 99% turnover rate — and it’s growing.
Restaurants, more specifically, see average annual turnover rates of 73%. Every lost employee costs the business thousands of dollars in lost revenue, productivity losses, increased administrative costs, and hiring costs.
To make matters worse, hiring is increasingly difficult. There is barely one unemployed person per job opening. That means a real talent crunch, resulting in longer recruiting cycles and higher costs of a departing employee. You want to keep the talented employees you worked so hard — and paid so much — to hire and train.
Do you have a retention problem? How to determine your turnover rate
As a restaurant owner, it’s important to know where you stack up against the industry average (73% annual turnover rate). Let’s walk through how to calculate your own employee turnover rate:
For example, if in February I had 20 employees, but 10 left, my February turnover rate would be 50%.
Don’t stop there, though. You can calculate turnover based on different employee segments, too. Compare turnover between full-time employees and part-time employees, between front-of-house and back-of-house staff. Most restaurants employees are part-time, so even if you’re keeping full-time employees, you may have a part-time employee turnover problem. Plus, different types of staff will have different paths to happiness, so you want to be able to know where to improve first. All types of turnover negatively impact your business, but you have to understand the problem before you can fix it.
If you’d prefer to avoid doing this manually (making it easier to track this on an ongoing basis), see if your payroll software can calculate this for you. For ADP customers, you can run their Employee Turnover Analysis Report. It’s a little rigid for those wanting to do more custom analyses, but it’ll give you an annual turnover rate. Otherwise, you may have to dive in and get your hands dirty, using data exporting or spreadsheets. (Or get in touch with us and we’ll calculate it for you!)
Solving your employee retention problem
The first step to solving the problem is understanding the problem. The top reasons employees leave are wages and benefits, but you should ask past employees why they left and current employees what would make them happier and more satisfied working for you. Hold “exit interviews” with every departing employee and ask them exactly why they’re leaving.
Depending on what you hear from employees, past and present, you can take action. It’s unlikely that there’s just a single silver bullet. Rather, it’s about bundling a bunch of solutions together.
More restaurants are getting creative to solve this problem. Food & Wine recently published an article exploring 19 different restaurants across the country, what they provided employees, and some insight into how it impacted retention rates.
It comes down to paying your workers well, providing some kind of health care coverage, allowing your employees to recharge with some paid time-off, improving workplace policies around issues like sexual harassment, and fostering employee careers through cross-training and development.
Notably, Biscuit Love, a group of three restaurants based in Nashville, TN that employs 130 people, sees a shockingly low 13% turnover rate due to their higher wages and health care options. Another 350-employee restaurant group in Indianapolis, Patachou Inc., was able to boost their employee retention rate by over 30% with health care coverage, paid time-off, better workplace policies, and paid parental leave.
There are a lot of ways to attack your retention problem by boosting employee happiness and well-being. You just have to know where you are, where you want to go, and how to take the first step.
Curious how to offer your employees, both part-time and full-time, health care without breaking the bank? Get in touch!